India Inc shakes off war worries as business confidence jumps in Q2

Business confidence in India increased in the second quarter of FY27, with companies expecting stronger domestic demand, higher capacity utilisation and increased hiring, even as global trade uncertainty and commodity price volatility remain key risks.

The improvement is supported by the easing of disruptions stemming from the West Asia conflict, according to the Confederation of Indian Industry's (CII) Quarterly Business Outlook Survey released Monday.

The CII Business Confidence Index (BCI) rose to 66 in Q2FY27 from 60.8 in the previous quarter, according to the 136th round of the survey. The survey drew responses from more than 240 companies across sectors, regions and firm sizes.


"The optimism shown by businesses, as reflected in the BCI, is a clear testament to the inherent resilience of the Indian economy even as geopolitical uncertainty continues," said Chandrajit Banerjee CII Director General.

The sharp improvement in sentiment comes against the backdrop of stronger-than-expected economic growth of 7.8% in Q1FY27, compared with 6.9% in the corresponding quarter a year earlier, according to official data.

The survey suggests that the improvement is also being driven by expectations of stronger activity in the months ahead.

The Expectation Index (EI) jumped to 67.7 in Q2FY27 from 60.6 in Q1, while the Current Situation Index (CSI) increased to 62.6 from 61.2. The widening gap between the two measures indicates that companies expect operating conditions in the coming quarter to be considerably better than those prevailing currently.

The domestic demand outlook has emerged as a key pillar of corporate confidence. About 61% of respondents expect domestic demand to increase in Q2FY27, while only 9.6% anticipate a moderation.

The proportion of companies expecting domestic demand to grow by more than 20% increased to 16% in Q2FY27 from 12.9% in Q1FY27.

More than half of the surveyed firms, or 51.6%, expect capacity utilisation to exceed 80% in the second half of 2026, compared with 36.6% expecting such utilisation levels in the first half.

The survey also points to a healthier employment outlook. Around 53% of respondents expect to increase their workforce in Q2FY27, indicating that companies are preparing for higher production and stronger business activity.

The improvement in confidence comes despite continuing cost pressures. While 61.1% of respondents expect input costs to rise in Q2FY27, the proportion is down from nearly two-thirds in the previous quarter.

The moderation in cost pressures could offer some relief to corporate margins if demand remains firm and companies are able to pass on a portion of higher costs to consumers.

The upbeat domestic outlook, however, is tempered by external risks. Global trade uncertainty emerged as the biggest risk for businesses over the next six months, followed by volatility in commodity prices.

"Indian industry is entering the second half of the year with greater confidence. While external risks require continued attention, the underlying momentum remains encouraging," said Banerjee.